The dynamic relationship between the dollar and US prices: An intensive empirical investigation |
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Affiliation: | 1. Department of Chemical Engineering, Shiraz University, Shiraz, Iran,;2. Faculty of Chemical Engineering, Sahand University of Technology, Tabriz, Iran;3. DWA Energy Limited, Lincoln, United Kingdom |
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Abstract: | The empirical, bivariate relationships between the dollar and US prices during the recent floating rate period are analyzed using time series methodology. Results indicate a long distributed lag from the dollar to the CPI, but no relationship in the opposite direction, and that a permanent 10 per cent decline in the dollar was ultimately followed by a CPI rise of 4.85 per cent. Similar results are obtained for various components of the CPI, including services, while substantially smaller price responses are reported in other studies that typically employ shorter lag structures in the context of structural econometric models. |
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